US Protectionist Policies: A Threat to Global Trade
The 2018 report of the Economist Intelligence Unit, anticipates a further strengthened, global trade growth in 2018-19. This is lightened by a powerful rising market export growth and fortified Chinese economic growth. However, there is a possibility, that the governance of the U.S. president, Donald Trump, who has used impressive words to interpret his policy of imposing duties on imports, into a more objective action, may severally injure global trade channels.
There are two key scenarios which we are particularly concerned about. First, is the U.S. pull out from the North American free trade agreement (NAFTA). Second, are the measures taken by the U.S. against China, constraining them, thereby instigating a trade war. Dialogues are set in motion on reviewing the NAFTA understanding. These include the negotiations which were viewed in January which had ended positively. Predictions arised that it results in a fresh understanding later in the year. In spite of this, there is a risk that Mr. Trump may be disappointed with the advancement of the negotiation, considering the fact that the U.S. might be seen as “losing’” on trade, therefore undertaking to pull out the U.S. out of NAFTA.
The detachment of the U.S. from NAFTA, (or even just a little doubt in the involvement of its members), would create a very huge commotion in one of the most significant free trade areas in the world, thereby Putting an end to such a leading trade bargain. This would likely stimulate protectionist sentiment in other parts of the world. By that, causing other countries and regions like Japan and European Union (EU) from agitating for a more laissez-faire trade agenda.
Throughout the NAFTA negotiations, the U.S. has been building up steps that out rightly or indirectly aims at China’s exports. The U.S. enforced tariffs on the importation of washing machines and solar cells. Consequently, the U.S. has multiple continuing investigations into the disposal and theft of intellectual properties by China. There is a risk that these trade conflicts, will intensify into a full-fledged trade war. This is most likely to happen if China disproportionately strikes back. Until now, China has been more calculated, creating, for example, a probe into U.S. sorghum imports.
A buildup in protectionism, would in the long run, surely have a rebound, which is beyond China and North America. The availability, as well as prices for Chinese and U.S. products in the supply chains of companies in other nations, would be severally affected. Accordingly, global trade would be evidently curbed as an investment and consumer expenditure will retrogress.